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U.S. Insurers Support Bill to Close Insurance Tax Haven Loophole

Source: Best Wire Services

Posted on 03 Aug 2009

The Coalition For A Domestic Insurance Industry, composed of 13 major U.S.-based property and casualty insurers, today voiced strong support of a bill re-introduced yesterday in the U.S. House of Representatives by Congressman Richard E. Neal (D-Mass) that would close a loophole used by foreign insurance groups to avoid U.S. tax. Foreign-based companies can shift their U.S. reserves and investment income overseas to avoid substantial U.S. taxes through reinsurance with an affiliate located in a tax haven.

Citing the need for a level playing field, Representative Neal's introductory statement noted that, since 1996, the amount of offshore affiliate reinsurance has grown dramatically from $4 billion to $33 billion in 2008. Tax-avoiding foreign groups, he said, now enjoy a significant market advantage over U.S. companies writing direct insurance here. He also suggested that before we consider cracking down on the foreign earnings of U.S. companies - as the President recently suggested in proposals tightening tax rules for U.S.-based companies operating overseas - we should make sure that income that should be taxed here in the U.S. is not stripped overseas to tax havens.

"Mr. Neal's legislation is crucial to the long-term health of the U.S. property and casualty insurance industry," said William R. Berkley, spokesman for the Coalition For A Domestic Insurance Industry. "This legislation remedies an inequitable situation and ensures that all competitors are treated similarly on their U.S. activities under the tax code. Closing this loophole would save the U.S. Treasury billions of dollars in lost tax revenues, without impacting arms length reinsurance transactions with third parties that occur in the ordinary course of business."